Correlation Between Distribution Solutions and Core Main

Can any of the company-specific risk be diversified away by investing in both Distribution Solutions and Core Main at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Distribution Solutions and Core Main into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Distribution Solutions Group and Core Main, you can compare the effects of market volatilities on Distribution Solutions and Core Main and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Distribution Solutions with a short position of Core Main. Check out your portfolio center. Please also check ongoing floating volatility patterns of Distribution Solutions and Core Main.

Diversification Opportunities for Distribution Solutions and Core Main

0.36

Correlation Coefficient

Distribution Solutions  Core Main

Weak diversification

The 3 months correlation between Distribution and Core is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Distribution Solutions Group and Core Main in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Main and Distribution Solutions is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Distribution Solutions Group are associated (or correlated) with Core Main. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Main has no effect on the direction of Distribution Solutions i.e., Distribution Solutions and Core Main go up and down completely randomly.

Pair Corralation between Distribution Solutions and Core Main

Given the investment horizon of 90 days Distribution Solutions Group is expected to under-perform the Core Main. In addition to that, Distribution Solutions is 1.8 times more volatile than Core Main. It trades about -0.02 of its total potential returns per unit of risk. Core Main is currently generating about 0.01 per unit of volatility. If you would invest  4,520  in Core Main on August 26, 2024 and sell it today you would earn a total of  7.00  from holding Core Main or generate 0.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Distribution Solutions Group  vs.  Core Main

Distribution Solutions

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Distribution Solutions Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Distribution Solutions is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Core Main

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Core Main has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Distribution Solutions and Core Main

The main advantage of trading using opposite Distribution Solutions and Core Main positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Distribution Solutions position performs unexpectedly, Core Main can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Core Main will offset losses from the drop in Core Main's long position.

The idea behind Distribution Solutions Group and Core Main pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.